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India’s new Narendra Modi government will be tested as the country’s critical monsoon rains are delayed. Fears are that the hold-up could lead to a huge rainfall deficit.

Low rainfall will dampen demand in rural India where farming, the main occupation, generates 14% of India’s economic output. The rainfall in June, the start of one of the country’s two main monsoon seasons, is among the lowest in a decade. The deficit is currently being measured at 38%.

The tardy, weak rains have caused a near drought as fields have dried up under the scorching heat. The sowing of main crops such as paddy, corn and sugarcane could be delayed in a rain-dependent country where about half of all farms lack irrigation systems. Reservoir levels are only a fourth of last year’s levels.

A weak monsoon is already sending food prices shooting up and sparking inflation. The price of onions has climbed over 20% in the past weeks. The government has restricted export of the commodity while attempting to crack down on hoarders.

Rising prices will hit India’s poor, and the resulting inflation will impact interest rates. This will put additional cost burdens on the industry and have an overall effect on the new government’s plans for an economic revival.

The news of a weak monsoon has dampened the mood in the stock markets and the index slid for three consecutive days last week.

Rice paddies in southern India (File image : Wikipedia)

India has been fighting high levels of inflation for the past few years. Inflation hit a five-month high of 6.01% in May. In recent months, the country’s central Reserve Bank has raised interest rates three times to keep consumer prices down.